China’s days of picking a number for GDP growth and moulding the economy to fit are probably over. At the same time, its planners still seem wedded to symbolic statistical goals. Targeting a range for national output, rather than any single figure, would be an elegant way to square the circle.
Targets die hard in a Socialist system that still thinks in five-year plans. While some, like household income growth or job creation, are more like guidelines, GDP is different. The government sets a target at each spring parliament, and the country grinds into action. Local authorities tend to exceed the goal with wasteful investment and all-out number-fudging. The combined third-quarter GDP reported by 30 of China’s 31 provinces as of Nov. 5 exceeds the national total by 9 percent.
The problem is that GDP includes things China can’t control, like volatile net exports, which accounted for over 10 percent of incremental output in the first nine months of the year. When trade partners buy less, the temptation is to invest blindly to compensate. Suppressing the exchange rate used to give exports a boost, but increasingly the yuan is being used to attract or repel short-term flows of capital rather than help out exporters.
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